Footnotes speak volumes in companies' SEC filings

By Rob Varnon |
December 28, 2012

John Krenicki, president and CEO of GE Energy, stands in the lobby of GE Oil & Gas Drilling Systems Technology Center during a tour of the facility Tuesday, May 8, 2012, in Houston. ( Brett Coomer / Houston Chronicle )

Photo By Brett Coomer/Houston Chronicle

The blog footnoted.com says GE is in contention for running the worst financial footnote of the year, about its ex-energy division chief, John Krenicki, above, resigning and receiving $89,000 a month until age 60.

Photo By Paul Sakuma/STF

The sun is reflected in the exterior of Dell Inc.'s offices in Santa Clara, Calif., Tuesday, Aug. 21, 2012. Dell Inc.?s announced Tuesday, Aug. 21, 2012, that its earnings slump deepened in its latest quarter as the growing popularity of smartphones and tablet computers undercut sales of its desktop and laptop computers. (AP Photo/Paul Sakuma)

Photo By Matt Rourke/STF

In this Aug. 15, 2011 photo, the logo on a Dell computer is displayed, in Philadelphia. Dell announced Monday, July 3, 2012, that it is buying Quest Software for about $2.36 billion, ending recent speculation about who the unnamed bidder was in a battle for the company with investment firm Insight Venture Partners. (AP Photo/Matt Rourke)

Photo By Gregory Bull/STF

**FILE** In this Nov. 17, 2004, file photo, Edward Lampert, chairman of Sears Holdings Corp., speaks during a new conference in New York. The chairman of Sears Holdings Corp. went on the defensive Monday, May 5, 2008, saying the troubled retailer's conservative approach to spending money will help it weather the nation's rocky economic outlook. Lampert told investors that Sears' competitors have overextended themselves through a rash of store openings and debt acquisition. (AP Photo/Gregory Bull, File)

Photo By Paul Sakuma/STF

Netflix, which has its headquarters in Los Gatos, Calif., said many users were unable to access online content on Christmas Eve.

Photo By Jeff Chiu/STF

The blog zinged Zynga over its footnoted disclosure that it had given a $2 million signing bonus to an Electronic Arts executive for joining the company.

Photo By Paul Sakuma/STF

Netflix became one of the six finalists for its low-key disclosure that its brand had been damaged with the introduction of its two-tiered pricing structure.

BRIDGEPORT, Conn., - General Electric's plan to pay its former energy division chief $89,000 a month for a decade is in the running for the worst financial footnote of 2012, according to a popular business blog.

The blog, footnoted.com, selected six disclosures from U.S. Securities and Exchange Commission filings for its eighth annual worst footnote competition.

Dell, Sears Holdings Corp., Yahoo, Zynga and Netflix joined GE in the title hunt this year.

Previous winners include Hewlett-Packard for a severance package granted to a CEO who spent less than a year on the job and Chesapeake Energy for buying its CEO's antique map collection for $12.1 million.

Voting is open through the end of the month and a winner will be announced Monday.

Footnoted was launched in 2003 when its founder, journalist Michelle Leder, published "Financial Fine Print." The blog scours SEC filings and reports on the fine print in those filings.

"I basically chose the nominees after looking at some of our top posts over the past year, but readers get to vote on who actually wins," Leder said. "Keep in mind that this is totally unscientific since I'm not able to police whether someone votes early and often."

$89,000 a month

GE landed on the list this year for its deal with John Krenicki, vice chairman of GE Energy.

The conglomerate announced in July that Krenicki would resign at the end of the year after the company decided to reorganize its energy business into three separate divisions. Krenicki agreed to a three-year no-compete contract, and GE agreed to grant him his annual bonus, allow existing stock options to vest and to provide a monthly retirement allowance of approximately $89,000 a month until he reaches age 60.

Krenicki was 50 at the time of the announcement, and he has agreed to work for private equity firm Clayton Dubilier and Rice beginning in January. GE retirees do not fully vest in the company's plan until age 60, so retiring 10 years early would affect Krenicki's payments.

GE defended the deal, saying it reflected Krenicki's abilities, service and the price of keeping the competition from poaching him immediately.

"Mr. Krenicki's retirement terms reflect his senior position, long service and significant contribution to GE as well as our interest in receiving strong noncompete and nonsolicitation agreement protections, which we received," said Seth Martin, a GE spokesman.

Long commute

The Connecticut-based company does face competition for the footnote award. Illinois-based Sears Holdings, whose chairman is Edward Lampert, was named to the list for providing Louis D'Ambrosio, Sears CEO, with regular use of the company jet to commute from his home in Philadelphia to Sears headquarters outside Chicago, despite being on the job for 14 months.

Texas-based Dell landed on the list this year when it revealed that Stephen Schuckenbrock, president of services, received $1.9 million in relocation benefits to move from Round Rock to Plano. Footnoted said, "Granted, Texas is a big state, but that's still only about 200 miles, or $9,655.19 a mile."

Yahoo slipped onto the list for disclosing that founder and former CEO Jerry Yang's decision to leave the company was not due to any disagreement with the board, despite article after article in the financial press indicating there were significant disagreements at Yahoo.

Neflix and Zynga

Netflix was listed for disclosing in its risk statement that the company had done some damage to its brand in 2011 by unveiling a two-tiered pricing structure. And Zynga landed on the list after stating it gave a $2 million signing bonus to a top Electronics Arts executive who joined the company.

In GE's case, Krenicki spent 29 years with the company and nearly doubled the size of its energy business since being named its head in 2005, the company said.